Well, this is interesting. Yours is a different problem than the normal. The definitive guide to the seat back cable replacement for the 850 series is located at Volvospeed, Bay 13:

http://www.volvospeed.com/Repair/seatcable1.php

The seat back cable is not normally broken, it just comes out of the socket because the cable is too short or the housing is to long. Obviously your seatback siezed on one side, causing the twist and breaking the cable. Taking the seat out for this repair may well be worth while. The drive shaft that runs across the back is surely to large to twist, so I suspect that the gearbox on one side or the other is causing the problem. I have actually never heard of anyone on the board posting this problem before, so don't expect too much in the way of how-to's. It may be that because of damaged gears, one side of the seat stopped, then the cable broke once the seat back twisted as far as it could before overcoming the strength of the cable. I would suspect that the problem is on the passenger side. The cable drives a worm gear on a nylon gear which in turn runs the driveshaft. In any case, you will have to get the gears disconnected, then work just the one side to get the seat back straight again.

Tips on seat cover removal/replacement. You may already have removed the cover, I wasn't sure, but I found that bending the hog rings open was easier than trying to cut them. Use small zip ties to replace them instead of using hog rings again, very easy to do that way.

Good luck, and welcome to the 850 club. It's really a pretty simple car to work on once you get used to it.

Phantom